Wednesday, June 22, 2011

The exaggerated benefits of job-hopping

In Silicon Valley, where companies frequently poach employees from each other, the pay of 50,000 software employees was studied by Kathryn Shaw, an economics professor at Stanford Business School, and her colleagues. For most experienced workers, typically those who had at least five years of experience in the field, the bulk of wage growth comes from staying with an employer, not hopping between companies. People who had a minimum of experience of five years with a single employer typically got 8% increases in compensation a year compared with about 5% for people with a history of job hopping. Dr. Shaw, who conducted the study in 2006 on behalf of the National Bureau of Economic Research, says she found a similar pattern among workers with relatively fewer skills, such as people who install car windshields.

"There's a perception in Silicon Valley that there's a gain to be had by hopping from employer to employer," says Dr. Shaw. "But short-term hopping is not advantageous to the employer or employee."

While it is rare for employees to spend their whole career at one company, most are better off if they stay put for five to 10 years, she says. One exception is young workers, who should initially be searching for a firm that offers the right match for their talents and interests, she says.--Shirley Wang, WSJ, on the case for sticking around

For the approximately 4% of the sample who earn over $1 million in the last period in which we observe them, as we look back over their careers, over 95 percent of their wage growth arose within firms, and less than five percent from movement between firms.--Frederik Andersson, Matthew Freedman, John Haltiwanger, Julia Lane, and Kathryn Shaw, "Reaching for the Stars: Who Pays for Talent in Innovative Industries?"